German unemployment soars above 5 million

31st January 2006, Comments 0 comments

31 January 2006, BERLIN - German unemployment soared over the politically sensitive 5-million mark in January, the Federal Labour Agency said Tuesday, with the jump being a reminder for Chancellor Angela Merkel's new government of the grim state of the labour market.

31 January 2006

BERLIN - German unemployment soared over the politically sensitive 5-million mark in January, the Federal Labour Agency said Tuesday, with the jump being a reminder for Chancellor Angela Merkel's new government of the grim state of the labour market.

The 408,000 increase in the number out of work in unadjusted terms to 5.012 million comes in the wake of a series of monthly falls in unemployment which had helped to ease the pressure on Merkel's Christian Democrat-Social Democrat grand coalition government.

"Unemployment in January developed substantially more unfavourably than is usually the case," said labour agency chief Frank-Juergen Weise when releasing the data, which drove unemployment back towards the post-Second Word War record it had reached in January 2005.

Despite high poll ratings, Merkel's government has been under fire from economists for failing to produce a comprehensive blueprint for reform of Europe's biggest economy.

But the January rise in the unemployment rate to 12.1 per cent - up one percentage point over December - could now result in unemployment being pushed back up to the top of Berlin's political agenda.

While Labour Minister Franz Muentefering insisted that unemployment should fall in the coming months, he said the latest data underscored the scale of the task facing German industry and its political leaders to push forward "courageously and confidently" with reforms to the social-security system and job market.

In seasonally-adjusted terms, which economists consider to be a more important gauge of labour market trends, unemployment leapt by 69,000 to 4.7 million.

Economists had predicted a 30,000 decline in the jobless number following on from the bigger-than-forecast 117,000 fall in December and the 55,000 drop in November.

Weise pointed to cold winter weather and an above-average increase in the numbers of older people registering as unemployed as the key reasons behind the jump in unemployment.

The labour agency is expecting the jobless numbers to remain above 5 million in February.

The increase in the numbers of older people registering as unemployed also comes ahead of the introduction Wednesday of a new law which will cut the length of time unemployment benefits are paid.

While the unemployment rate stood at 10.2 per cent in the more economically important western part of the country in January, the jobless rate came in at 19.2 per cent in the formerly socialist east.

The rise in January unemployment comes despite growing optimism about Germany's prospects as the economy hauls itself out of a protracted period of stagnation. Business confidence hit a five-year high this month.

Some economists are predicting that German growth could hit 2 per cent this year, largely as a result of another strong performance by the export sector.

But while consumer confidence has also been rising in recent months, high unemployment combined with record oil prices and low wage growth has made the nation's consumers very reluctant to open up their wallets and spend.

German consumer spending remains the weak link in the upswing in Europe's biggest economy, with data also released Tuesday showing retail sales, adjusted for inflation and seasonal factors, slumping by 1.4 per cent in December and by 1.6 per cent compared to a year earlier.

At the same time, several key companies have announced another round of lay offs with leading business industry groups ruling out any big jump in employment this year by their corporate members.

Last week, the Stuttgart-based carmaker DaimlerChrysler AG announced it was trimming its administrative workforce by a further 6,000 mainly in Germany. The transatlantic car giant has announced job cuts totalling 14,500 since September.

Equally worrying was another drop in job vacancies. Private-sector vacancies fell by 26,000 in January, according to the labour agency.

Nevertheless, economists remain confident that unemployment will continue to fall as the year progresses with the labour office also insisting that the January increase did not alter the "fundamental downward direction in unemployment."

Seasonally unadjusted unemployment January was 75,000 less than in the same month a year ago, when a change in the nation's welfare benefit system produced a big jump in joblessness.

"In the coming months, we expect the downward trend in seasonally adjusted unemployment to resume," wrote Morgan Stanley economists Elga Bartsch and Thomas Gade in a note to clients.

In its annual economic report released last week, the government forecast the average unemployment rate to edge down to 10.9 per cent this year from 11.7 per cent in 2005.

DPA

Subject: German news

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